The European Court of Justice will rule next week (5 March) on the highly-publicised case involving a group of Spanish fishermen and fishing companies, collectively known as Factortame III, which took the UK to court for refusing to grant them a licence to fish in British waters because of their nationality.

Under the British Merchant Shipping Act, fishing vessels may only be registered in the UK if their owners meet a list of conditions relating to nationality, residence and domicile. Unregistered boats are not allowed to fish.

The Court ruled in 1991 that this act broke EU rules, but left the issue of compensation unresolved. Next week’s ruling concerns the key question of whether or not the Factortame firms should be compensated and, if so, by how much.

The UK, backed by several other member states and the European Commission, argues that compensation should be awarded only when the breach is “manifest and grave” – for example when a country ignores warnings from the European Court or when it flagrantly flouts Union law.

Member states also want compensation to be made conditional on fault, meaning that governments should not have to pay for mistakes made by officials who are ignorant of the law.

If there is any doubt about the guilty official’s intentions, member states should not have to pay up, they insist.

But the fishing firms argue that it is virtually impossible to prove, beyond doubt, that a civil servant willingly broke the law, especially given the fact that access to government documents is often restricted.

In a preliminary opinion delivered last November, Advocate-General Giuseppe Tesauro said that the Factortame III firms were entitled to compensation.

He agreed with member states that they should only pay for mistakes when they are “manifest and grave” but concluded that, in this case, the UK government’s actions were both.

Tesauro declared, however, that it was up to the national courts to decide how much to award and whether or not the final sum should include interest which might have accrued on lost profits.

Although not legally binding, Tesauro’s opinion is likely to have a strong influence on the judges’ deliberations.

Lawyers warn that a victory for Factortame could open the door to a flood of similar cases, which could cost member states millions of ecu.